Business rates should be used to “green” the built environment, a leading social and economic think tank has announced this week.

The Social Market Foundation called on the government yesterday to introduce a “green buildings” tax relief system to encourage businesses to reduce the carbon footprint of their properties.

This echoes the Building 99% Campaign’s calls for the introduction of financial incentives to make existing buildings more energy efficient.

In a report, launched by Labour MP Phyllis Starkey, who also backed the 99% Campaign, the SMF claims a tax relief system for green buildings could, along with regulations and government targets, spur an improvement in environmental standards.

The report also points out that the tax break could be aligned to energy performance certificates.

It states: “Under a new green buildings incentive, businesses could be offered rate reductions for energy-efficient buildings with the grading being based on a calculation of the energy use per square metre of floor area and the environmental impact based on carbon dioxide emissions.”

A further option is to make rate relief available for local authorities to grant to businesses meeting local climate change challenges.

Dave Farebrother, assistant director at Land Securities Group, said the success of the initiative depended on the size of the relief. He said: “In principle it seems like one of the better fiscal incentives and an idea worth exploring. But we would need more detail on how much relief there would be.”

Meanwhile, an investigation by Building this week revealed that the UK lags behind other European Union countries when it comes to tax incentives to make domestic properties more energy efficient. Its poor record on commercial buildings is similar to the rest of Europe.

Many European countries had pre-existing tax breaks to upgrade domestic properties – in France, Finland, Denmark and Sweden, stamp duty is waived for homes that are energy-efficient. However, only Germany has incentives in place for non-domestic stock within the EU.

The USA and Canada have clear tax incentives for energy consumption. Financial support for energy-efficient retro-fitting can reach up to £12,000.